Roth IRAs Are Booming

Matt Shelly
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A lot of people aren't sure what the best investment is for retirement, so many end up contributing to their company's 401(k) plan and leave it at that. That has changed over the last few years because more people have begun investing in Roth IRA plans. Baby boomers are helping to fuel this recent surge in Roth IRA popularity because many are rolling over 401(k) plans into Roth IRAs as part of their retirement planning.

In 2009, there was $6.8 billion in regular IRAs that were converted to Roth IRAs by investors trying to get more of out of their retirement accounts. Just one year later in 2010, that number ballooned to $64.8 billion due to several laws that took effect that year. Those laws were particularly attractive to baby boomers who wanted to leave money to heirs after death because Roth IRAs can be passed on to family members without tax liabilities. Investing in a Roth IRA is also beneficial because there are no penalties for withdrawing money, and once the account owner reaches seventy years and six months of age, withdrawals are no longer necessary. There are also no penalties for selling certain stocks within the IRA should they peak in order to maximize earnings.

It isn't just boomers who are investing in these, though. Younger generations are also taking an active interest in Roth versus traditional IRAs because of the options and flexibility of this type of investment. For example, a self-directed Roth IRA allows the account holder to have check-writing privileges on the account and greater control over stock choices. This gives investors the opportunity to diversify their portfolios and take control of their retirement planning. Few investment opportunities offer this much freedom for investors, making it attractive to people of all ages who want an active role in their money management rather than turning all responsibility over to investment professionals.

As an accounting professional, this rise of the Roth IRA has lots of implications for you. Not only must you learn all of the new laws regarding these investments but you must be able to answer any questions clients have as well. You also have to keep up with changes in these laws each and every year to see how it affects your customers. Even though there are many tax-free advantages for clients, Roth IRAs may still carry some tax liabilities that can have a big effect when it's time to file taxes for the year.

Due to a few investor-friendly changes in law in 2010, Roth IRAs became one of the most popular forms of investment for those looking to plan for retirement. Though baby boomers have helped the Roth IRA push greatly, this type of investment is a good idea for anyone looking toward the future. With few tax penalties and the chance to diversify, there is no better time to take the plunge.



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